Review of Industrial Organization 18: 161–173, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
The Effects of ATM Surcharges on Small Banking
ROBIN A. PRAGER
Board of Governors of the Federal Reserve System, Washington, DC 20551, U.S.A.
Abstract. Effective April 1, 1996, the Cirrus and Plus national ATM networks modiﬁed their operat-
ing rules to allow ATM owners to impose surcharges on other banks’ customers who use their ATMs.
Since 1996, surcharging has become widespread and has attracted a great deal of opposition. Among
other things, surcharge opponents argue that the imposition of surcharges will cause customers to
shift their deposits away from small banks that own few ATMs, toward large banks that own extensive
networks of ATMs. This article provides empirical evidence regarding the effects of surcharging on
small banks’ deposit market shares and proﬁtability.
Key words: Automated teller machine, banks, surcharge.
Effective April 1, 1996, the Cirrus and Plus national automated teller machine
(ATM) networks modiﬁed their operating rules to allow ATM owners to impose
usage fees, known as surcharges, on other banks’ customers who use their ATMs.
Since that time, surcharging has become quite widespread, with a GAO study indic-
ating that as of February 1, 1998, surcharges were imposed at 79% of bank-owned
ATMs (U.S. General Accounting Ofﬁce, 1998).
ATM surcharges have attracted a great deal of attention in the press, on Capitol
Hill, and in state legislatures, with many surcharge opponents complaining about
banks “double charging” customers for access to their own money. The “double
charging” complaint refers to the fact that many ATM users pay a fee to their
own bank, known as a foreign fee, as well as a surcharge fee to the ATM owner
when they undertake an ATM transaction at a machine not owned by the institution
holding their deposit account.
The author thanks Paul Tan for excellent research assistance. Dean Amel, Tim Hannan and Steve
Rhoades provided valuable comments and suggestions on an earlier draft. The views expressed herein
are those of the author and do not necessarily reﬂect the views of the Board of Governors or its staff.
Bank-owned ATMs include those owned by commercial banks or thrifts, but not those owned
by non-depository institutions.